LIVE FUTURES REPORT 22/03: SHFE copper prices slide after dollar rebounds

Copper prices on the Shanghai Futures Exchange were down during morning trading on Friday March 22, with the red metal coming under pressure from a rebound in the US dollar.

The most-traded May copper contract on the SHFE stood at 48,980 yuan ($7,317) per tonne as at 10.27am Shanghai time, down by 440 yuan per tonne or 0.9% from Thursday’s close of 49,420 yuan per tonne.

Renewed strength in the US dollar, following the currency’s dive on Thursday after the surprisingly dovish tone struck by the US Federal Open Market Committee, coupled with weak fundamental indicators for copper have combined to push prices for the red metal lower this morning.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, pushed higher overnight as it benefitted primarily from weakness in the pound sterling against a backdrop of pessimism surrounding the United Kingdom’s exit from the European Union.

“In a world where major central banks look set to remain on the sidelines for the remainder of this year with the risk of easing more likely than tightening, the US economy continues to win the least ugly contest. Thus the USD looks attractive amid a likely low volatility environment and carry appeal,” Rodrigo Catril, currency strategist at National Australia Bank, said in a morning note.

The index, at 96.32 as at 10.28am Shanghai time, has reclaimed the psychological level of 96 and is up from a low of 95.83 on Thursday.

“The base metals sector also struggled against this backdrop [of a stronger US dollar]. The fact that the Fed halted its rate hikes due to the downgrading of its economic forecasts, finally dawned on the market,” senior ANZ Research economist Cherelle Murphy said.

Copper’s weakness in terms of fundamental indicators (ie, rising available stocks, easing tightness at the front end of the curve and soft premiums in the physical market) could inspire some profit-taking over the immediate term, according to Fastmarkets analyst Boris Mikanikrezai.

Other highlights:

– On Thursday, the Bank of England held bank interest rates steady at 0.75%.
– In US data on Thursday, weekly jobless claims fell by 9,000, while the Philadelphia Federal Reserve’s business outlook index for March beat expectations at 13.7, up from -4.1 previously.
– In data on Friday, there is a host of manufacturing purchasing managers’ index (PMI) data out across Europe and the United States.